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Mary Walker, president of Rusco Company, considers $44,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $39,000 in cash was available at the end of this year. Since the company reported a large net income for the year, and also issued both bonds and common stock, the sharp decline in cash is puzzling to Ms. Walker.

Rusco Company Comparative Balance Sheet at July 31
	This Year			Last Year
Assets
Current assets:
Cash and cash equivalents	$	39,000		$	61,800
Accounts receivable		228,800			241,200
Inventory		271,600			210,400
Prepaid expenses		23,800			43,800
Total current assets		563,200			557,200
Long-term investments		162,000			240,000
Plant and equipment		908,000			774,000
Less accumulated depreciation		222,000			197,200
Net plant and equipment		686,000			576,800
Total assets	$	1,411,200		$	1,374,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	196,600		$	256,400
Accrued liabilities		10,400			19,800
Income taxes payable		61,200			51,000
Total current liabilities		268,200			327,200
Bonds payable		272,000			128,000
Total liabilities		540,200			455,200
Stockholders equity:
Common stock		742,800			720,000
Retained earnings		128,200			198,800
Total stockholders' equity		871,000			918,800
Total liabilities and stockholders' equity	$	1,411,200		$	1,374,000

Rusco Company Income Statement For This Year Ended July 31
Sales					$	1,280,000
Cost of goods sold						800,000
Gross margin						480,000
Selling and administrative expenses						342,400
Net operating income						137,600
Nonoperating items:
Gain on sale of investments	$	32,000
Loss on sale of equipment		(10,800	)			21,200
Income before taxes						158,800
Income taxes						47,520
Net income					$	111,280

The following additional information is available for this year.

1. The company declared and paid a cash dividend.

2. Equipment was sold during the year for $63,200. The equipment originally cost $138,000 and had accumulated depreciation of $64,000.

3. Long-term investments that cost $78,000 were sold during the year for $110,000.

4. The company did not retire any bonds payable or repurchase any of its common stock.

Because the Cash account decreased so dramatically during this year, the companys executive committee is anxious to see how the income statement would appear on a cash basis.

Required:

1. Using the direct method, adjust the companys income statement for this year to a cash basis.

2. Using the data from (1) above, and other data from the problem as needed, prepare a statement of cash flows for this year.

Apex Company prepared the statement of cash flows for the current year that is shown below:

Apex Company Statement of Cash FlowsIndirect Method
Operating activities:
Net income				$	40,700
Adjustments to convert net income to cash basis:
Depreciation	$	21,200
Increase in accounts receivable		(62,000	)
Increase in inventory		(26,000	)
Decrease in prepaid expenses		11,000
Increase in accounts payable		54,800
Decrease in accrued liabilities		(10,900	)
Increase in income taxes payable		4,300			(7,600	)
Net cash provided by (used in) operating activities					33,100
Investing activities:
Proceeds from the sale of equipment		15,200
Loan to Thomas Company		(40,900	)
Additions to plant and equipment		(120,300	)
Net cash provided by (used in) investing activities					(146,000	)
Financing activities:
Increase in bonds payable		88,700
Increase in common stock		39,200
Cash dividends		(28,400	)
Net cash provided by (used in) financing activities					99,500
Net decrease in cash and cash equivalents					(13,400	)
Beginning cash and cash equivalents					28,400
Ending cash and cash equivalents				$	15,000

Required:

Compute Apex Companys free cash flow for the current year. (Negative amount should be indicated by a minus sign.)

For the just completed year, Hanna Company had net income of $46,000. Balances in the companys current asset and current liability accounts at the beginning and end of the year were as follows:

	December 31
	End of Year		Beginning of Year
Current assets:
Cash and cash equivalents	$	60,000	$	79,000
Accounts receivable	$	162,000	$	190,000
Inventory	$	430,000	$	361,000
Prepaid expenses	$	12,500	$	13,500
Current liabilities:
Accounts payable	$	360,000	$	382,000
Accrued liabilities	$	8,000	$	13,000
Income taxes payable	$	36,000	$	25,000

The Accumulated Depreciation account had total credits of $50,000 during the year. Hanna Company did not record any gains or losses during the year.

Required:

Using the indirect method, determine the net cash provided by operating activities for the year. (List any deduction in cash and cash outflows as negative amounts.)

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